Due to a shortage of raw materials, a disruption in the global transport chain, a huge increase in demand and a shortage of supply, the prices of certain raw materials have recently been skyrocketing. For producers and suppliers, as well as for retailers and wholesalers, the sharp rise in prices of certain products is very noticeable in their pockets. The question therefore arises as to what you should do with your current contracts with your business partners. All too often these contracts stipulate a fixed price for the goods you buy and/or sell. Can you unilaterally decide whether or not to agree to the new prices that are imposed on you and can you then simply pass this price difference on to your customers?
If there are no price adjustment agreements in the contract or in the general terms and conditions, it is in principle not possible to simply increase prices during the term of the contract.
However, the knife cuts both ways. If your manufacturer or supplier adjusts its prices without this being provided for in the agreement or in its general terms and conditions, this also means that you do not have to agree to this. If your business partner does so anyway, it is best to protest as quickly as possible. This is the only way to avoid implicitly agreeing to the new prices.
The best way to deal with unexpected price increases is to provide in your contracts and general terms and conditions in advance that you reserve the right to revise the agreed prices. Although the rules differ slightly depending on whether you do business with consumers (B2C) or entrepreneurs (B2B), the basic principles are similar.
For example, a contractual clause must always reflect in a clear way how and why the price will be adjusted. If not, there is a chance that the clause is not valid. It is also best to link the price adjustment to the actual additional costs you will incur to purchase or produce the goods or products. In any case, making the adjusted price depend on an index figure such as the consumption index is to be avoided.
Specifically for the construction sector, it is advisable that a clear agreement is made between the client and the contractor as to the level at which price increases can be passed on, and if daily prices are used, these should be announced at the start of the work in order to avoid later discussions. Since it is often impossible to predict how big the increase will be, one can work, for example, with the I-index, i.e. the index that measures the evolution of material costs.
If you are not working with fixed price agreements or general terms and conditions, it is a good idea to inform your clients about possible price increases. You can do that, for example, by already warning them in your fixed e-mail signature that due to the sudden increase of certain raw material prices you will be forced to adjust your prices as well. In this way, you are transparent about your prices and you avoid any later discussions about the prices you are using.
Have you not yet included provisions on price adjustment or revision in your agreements and general terms and conditions or do you doubt the validity of your clause? Then please contact us HERE.